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The document describes production processes (A, B, C) for chairs at ABC Carpentry Workshop in October 2021. It provides input and output data for each process, including materials used, direct labor hours/costs, actual output, process losses, and normal expected loss percentages. Additional information notes that overheads are absorbed at 120% of direct labor and that all process losses were scrapped and paid for. The questions require preparing process accounts for the product and determining the unit cost, and analyzing production and cost data for Poly fibre Ltd to prepare absorption and marginal costing profit/loss accounts.

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ADEKE MERCY
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62 views2 pages

Untitled

The document describes production processes (A, B, C) for chairs at ABC Carpentry Workshop in October 2021. It provides input and output data for each process, including materials used, direct labor hours/costs, actual output, process losses, and normal expected loss percentages. Additional information notes that overheads are absorbed at 120% of direct labor and that all process losses were scrapped and paid for. The questions require preparing process accounts for the product and determining the unit cost, and analyzing production and cost data for Poly fibre Ltd to prepare absorption and marginal costing profit/loss accounts.

Uploaded by

ADEKE MERCY
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question 1

ABC Carpentry Workshop produces a product called “chair’ which passes through three
processes A, B and C. During October 2021, the following took place in that company.

Process A - data

- 12,000 kg of material 1 were injected into the production process and each kg was valued
at Shs. 6,500/=
- Direct labour cost was 8,500 labour hours used in the production process and each hour
was at Shs 3,500/=
- Actual output turned out to be 9,500 units.
- Process loss was scrapped at Shs. 6,000/= per unit and was paid for by cheque.

Process B - data

- 4,000 kg of materials were added to the production process and each kg was valued at
Shs. 7,000/=
- Direct labour amounted to Shs. 14,000,000 (14m)/=
- Actual output turned out to be 10,500 units and the process loss was scrapped at Shs.
9,000/= per unit.

Process C –data

- Additional materials totaling 1,000 kg valued at Shs. 5,000/= per kg were introduced in
the production process.
- Direct labour amounted to Shs. 12,000,000
- Actual output was 11,500 units while process loss was scrapped at Shs. 9,000/= per unit.

Additional information

i. Overheads were absorbed at 120% of direct labour.


ii. Normal loss was expected to be 8%, 6%, and 3% respectively for process A, B and C.
iii. All process losses were scraped and properly paid for.

Required;

1) Prepare the process accounts for this product. (20 Marks)


2) Determine the product cost per unit. (5 Marks)

Question 2

a) Poly fibre Ltd located in Namanve produces customized polythene bags used by different
manufacturers to pack their products. The following information relates to the month of
April 2019:
- Production 40,000 polythene bags
- sales 30,000 polythene bags

Item Ugx

Production costs:

Direct materials 4,800,000

Direct Labour 1,200,000

Variable overheads 1,000,000

Fixed overheads 1,800,000

Selling and administration costs:

Sales commission 500,000

Variable general expense 320,000

Overheads (fixed) 480,000

The company sells each polythene bag at Shs 300

Required:

i. Profit /Loss account on the basis of Absorption Costing. (8 Marks)


ii. Profit / Loss account on the basis of Marginal Costing. (8 Marks)
iii. Account for the difference in the profit reported in the two approaches. (3 Marks)
b) Mention six assumptions that underlie the Cost- Volume Profit Analysis. (5 Marks)
c) Outline and explain two advantages in each case for:
i. Absorption Costing (2 Marks)
ii. Marginal Costing (2 Marks)

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